How do these two factors go hand in hand?
For a long time, there has been debate on whether or not minimum wage changes have an effect on the cost of living. Cost of living can be measured by CPI, which is the consumer price index, or the inflation rate. Minimum wage doesn't always result in changes in inflation. But some states set their own effective minimum wages to keep up with Inflation. This website looks at the effective minimum wage and the cost of living factors to see, are people able to live with their wages in relation to inflation at the time.
Control: Texas, Florida, Georgia, Mississippi, Alabama, Louisiana, South Carolina, Tennessee, Kansas, Indiana, Oklahoma, Pennsylvania, Virginia, Missouri, Utah, North Carolina
Treatment: California, Washington, Oregon, New York, Massachusetts, Illinois, Connecticut, Colorado, Alaska, Hawaii, District of Columbia, New Jersey, Michigan, Minnesota, Maryland
| Year | State | Effective Minimum Wage | Effective Minimum Wage 2020 Dollars | CPI Average | Annual Inflation Rate(Non-Tradeable Sector) | Annual Inflation Rate(Tradeable Sector) | Annual Inflation Rate | Control/Treat |
|---|---|---|---|---|---|---|---|---|
| 1998 | Alabama | 5.15 | 8.17 | 163.00 | 1.843965 | -1.310454 | 0.614208 | 0 |
| 1998 | Alaska | 5.65 | 8.97 | 163.00 | 0.605620 | 1.931390 | 1.125831 | 1 |
| 1998 | California | 5.15 | 8.17 | 163.00 | 0.406482 | -0.022475 | 0.344448 | 1 |
Dataset Fields
Year: Ranges from 1998 to 2017, total of 20 years
State: States mentioned above
Effective Minimum Wage: The minimum wage currently in effect for the state.
Effective Minimum Wage 2020 Dollars: Adjusted into 2020 $
CPI Average: Average CPI for the year
Annual Inflation Rate(Non-Tradeable sector): Goods and services that are not easily traded or exported internationally.
Annual Inflation Rate(Tradeable Sector): Goods and services that can be sold to consumers outside of the country.
Control/Treat: Dummy variable for whether or not a state is in the control or treatment group.
Data Source: We merged two datasets together to do this analysis. One dataset comes from a Kaggle user named Lislejoem, who aggregated US minimum wage by state from 1968 to 2020. This data is from US Department of Labor. The second dataset is from Princeton, Columbia, and UC Berkley Professor's named Hazell, J., J. Herreno, E. Nakamura, and J. Steinsson. They scraped microdata from the Bureau of Labor Statistics to get different inflationary statistics.
Placement into Control or Treatment: The control states are those that have either maintained the federal minimum wage or have increased the state minimum wage above the federal minimum wage by less than $1. The treatment states are those that have increased their minimum wage above the federal minimum wage by more than $1